material requirements planning: bill of materials (bom ...€¦ · public sap business one version...

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SAP Business One Version 9.3

Material Requirements Planning:Bill of Materials (BOM) Scenario

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At the end of this topic, you will be able to:

▪ Run the MRP wizard for items with a bill of materials

▪ Explain MRP results for BOM items

Objectives


Business Scenario

▪ OEC Computers produces some of their items in-house.

▪ These items have a bill of materials composed of inventory items,

labor and resources

▪ Some items they sell are kits based on an assembly bill of

materials.

▪ The procurement manager, would like to be able to plan ahead for

sales demand and item availability using MRP for all these items.


Contents

▪ Using MRP for BOMs: Basics

▪ Effects of Cumulative Lead Time

▪ Effects of Excluding Warehouses

▪ MRP for Sales or Assembly BOMs

MRP for BOMs: Basics


Example Bill of Materials

BOM SKETCH

Keyboard PC Labor resource (X2)

Mother board Hard disk

Memory card (X2)

Parent Item

(make):

Child Items

(make\buy):

Grandchild

Items

(buy):

Server

CaseLabor resource

(X3)


Basic Concepts for Using MRP for BOMs

Demand for a

BOM item MRP run

When we run MRP for an item with a

production bill of materials, demand for the

parent item generates requirements for the

child items in all BOM levels MRP generates 3 types of

recommendations for the

child items:

▪ Production Orders

▪ Purchase Requests or

Purchase Orders

▪ Inventory Transfer

Requests


Running MRP for the Parent Item

parent item

MRP ReportStep 3 of the wizard

child items


Child Item Recommendations

When an MRP run includes a child item, all demand for the item is presented.

MRP Report

BOM requirement

Requirement not

related to the BOM


Running MRP for a child item

BOM requirement

Requirement not related to the BOM

Demand

MRP Report for

Hard Disk Child Item

Effects of Cumulative Lead Time


Lead Time Definition

Lead Time

▪ Defined as time from when an item

is ordered until received

▪ Based on either time to

manufacture or time to purchase

▪ Used by MRP to schedule

recommendations for child items

▪ Specified in Days in Item Master

Planning Data

Item Master Data

Planning Method MRP

Procurement Method Buy

Lead Time 2 Days


Cumulative Lead Time Concept

M

1

T

2

W

3

Th

4

F

5

S

6

Su

7

M

8

T

9Item Item Cumulative

Number Description Lead Time

S10001 Server 2+2+2

P10009 PC 2+2

C00999 Hard disk 2

C00009 Memory Card 2

C00098 Case 2

Time needed to purchase Time needed to buildTime needed to receive components


Options Affecting Lead Time

In Step 2 of the MRP Wizard,

you have options that affect lead time:

▪ Consider holidays

▪ Ignore Cumulative Lead Time


Option: Ignore Lead Time

M

1

T

2

W

3

Th

4

F

5

S

6

Su

7

M

8

T

9Item Item Cumulative

Number Description Lead Time

S10001 Server 2+2+2

P10009 PC 2+2

C00999 Hard disk 2

C00009 Memory Card 2

C00098 Case 2

Time to purchase Time to build Time to receive components


Report

Item Number Item Description March 29 March 29 March 30 March 31 Future Data

S10001 Server

Initial Inventory

Supply

Demand

Final Inventory

P10009 PC Set

C00097 Hard Disk

Effect of Lead Times on Future Demand

MRP Results

Planning Horizon: March 1 to March 30

10

10

10

10

10


Theoretical Recommendation: Lead Time Example

▪ The demand for the server is on April 2

▪ MRP horizon is until March 31

▪ Defined lead time = 1 day for each item

▪ Lead times are used to calculate when the first

component (the hard disk) must be available to

produce the PC and finally the server

Item March 30 March 31 Future Data

Server (parent) Demand +

Theoretical

Recommendation

PC (2nd level parent)

RecommendationDemand

(MRP Requirement)

Hard Disk (child)

RecommendationDemand

(MRP Requirement)


Pegging Information for Theoretical Recommendations

Report

Item Number Item Description March 30 March 31 Future Data

S10001 Server

Initial Inventory

Supply

Demand

Final Inventory

P10009 PC Set

C00097 Hard Disk

MRP Results

Planning Horizon: March 1 to March 30

10

10

Pegging Information - BOM

Item S10001

Supply Details:

Type: Production Order

Due Date: April 2

Quantity: 10

Remarks: Theoretical Recommendation

Pegging Information - BOM

Item S10001

Supply Details:

Type: Production Order

Due Date: April 2

Quantity: 10

Remarks: Supply from Theoretical

Recommendation

10

10

10

Effects of Excluding Warehouses


BOMs and Excluding Warehouses in MRP

Keyboard PC Labor

Mother board

Hard disk

Memory card (X2)

Server

Case Labor

▪ You can exclude a warehouse in Step 4 of the MRP Wizard.

▪ Remember to ensure all child items are available in the included warehouses.


Example: BOM and Excluding a Warehouse

Hard disk item is taken

from warehouse 02 in the

BOM definition

Warehouse 02 is not included in the scenario

No recommendation is generated

MRP for Sales or Assembly BOMs


MRP for Sales / Assembly BOMs

▪ You can run MRP for a Sales or Assembly BOM

▪ Since the parent is not an Inventory item, it will not generate MRP recommendations

▪ Recommendations are given for child items only

▪ A compensating supply entry is added to the MRP report to balance the demand

Phone Headphones

Parent Item

(non-inventory item)

Child Items

(inventory items)

Media Kit


Phone

MRP Report for Sales and Assembly BOMs

Recommendations are given to the child item

No recommendations are given for the parent

To view the parent item, select option on MRP Step 2 :


Assembly Sales/BOM Pegging Information

Demand came from forecasts for the parent item.

The supply came from the child

items in the assembly BOM.


Summary

▪ Three types of recommendations are possible for items with a bill of materials

▪ Production Orders for produced items (parent items)

▪ Purchase Documents for purchased items (child items)

▪ Inventory Requests for both types of items

▪ When running MRP for a parent item, demand is displayed for all child items with bills of materials

▪ When running MRP for a child item, demand is displayed for the item, including demand derived

from the parent item

▪ Cumulative lead time is the total time needed to produce a bill of materials, considering the lead

time of all components

▪ Recommendations in the Future Data column are called theoretical recommendations

▪ When running the wizard by warehouse level, SAP Business One does not generate

recommendations when the warehouse defined for the child item is excluded from the run

▪ Sales and assembly BOMs can be planned with MRP but no recommendations are given for the

parent item

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